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Newspaper | AccountingWEB | Tax hits the headlines
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Tax hits the headlines

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With Angela Rayner and non-doms sending the press into a frenzy in the last week, Philip Fisher looks at tax being big news.

17th Apr 2024
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In the public mind, accountants and the matters to which we devote so much of our lives are practically invisible – and the word practically in that sentence might be redundant.

It is, therefore, surprising and maybe even gratifying that, over the last week, two major news stories have focused on taxation.

In reality, the tax has less to do with the inception of these stories than the politicking, which some might regard as scurrilous or even unprincipled.

Angela Rayner

From a tax perspective, the question as to whether Angela Rayner owes a minimal amount of capital gains tax on the sale of what experts have apparently opined was a principal private residence is a nothing.

Those who deal with these issues on a regular basis know that there are a number of exemptions, which make it more likely than not that the Labour Party Deputy Leader has complied with the law. Whether she has done something wrong regarding voting registration is for others to decide.

The much more significant explosion of media anger relates to the abolition of domicile status.

Strangely, when Jeremy Hunt announced in the Spring Budget that domicile status was to be abolished, the mass media accepted his proposals with barely a murmur, primarily amused (there is no other word) that he had borrowed/stolen a Labour Party policy.

Headlines

However, when his shadow, Rachel Reeves, developed the Conservative Party proposition with an attempt to close what have been described as “loopholes”, this generated one of the best headlines in recent memory - “’Petrified’ non-doms poised to flee UK over Labour’s tax plans, say experts”.

Without wishing to sound too unkind, many of us would be petrified if we were in a war zone as bombs exploded all around and gunshots sounded in the streets. The worst that can happen to a taxpayer as a result of legislative changes is that he or she may have to pay additional taxes.

The non-doms in question will almost certainly all be multimillionaires and are unlikely to be destitute as a result of the Conservative plan or the Labour fine-tuning.

Devastating effect

The first question to ask is why closing the loopholes could have such a devastating effect.

After all, if the original proposals were hitting the bullseye, then they would have resulted in the petrification without the need for Ms Reeves to step in.

One possibility is that Jeremy Hunt had formulated legislation that was intended to be fiscally ineffective and was purely political window-dressing. This meant that when Rachel Reeves announced that her version would have teeth, a number of the victims cried foul.

If the hysterical comments splashed around in the press by some in our own field are to be believed, hordes of generally idle, very rich foreigners are already in the process of relocating to lower tax destinations, presumably already hard at work with their Italian or Spanish phrase books.

Breaking the issues down

It seems necessary to break these issues down into their constituent parts. Can anyone really justify the continuation of a tax status that ceased to serve a purpose a century ago and whose beneficiaries are selected on what is effectively a random basis.

For those that were so keen to “take back control”, tax breaks worth millions that are not available to any Brits, other than in very limited circumstances, would seem to be ripe for abolition.

If the consequence is that some of the former beneficiaries choose to leave the country, that is another matter.

For the most part, one imagines that those taking such actions will be contributing little to the Exchequer, although they are likely to be responsible for the boom in luxury house prices, which trickles down right through the property market.

Fresh legislation

Should we believe that some, or even all, of those who are losing out need incentives to keep their money (and themselves) in the UK, then surely the obvious solution is to create fresh legislation that is directly targeted at these individuals and, more specifically, ensures that they invest their money in the UK on a long-term, sustainable basis, paying taxes here in largely the same way as you or me.

Undoubtedly, there will be some losers, as well as many winners (i.e. everyone who was unable to take advantage of the non-dom rules) should the Conservative legislation take effect, and even more so with the Labour amendments.

Strangely, judging by the media furore, those who are most concerned about losing out appear to be lawyers and accountants, since the non-doms themselves have wisely been keeping their heads far below the parapet.

Replies (2)

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By FactChecker
18th Apr 2024 20:07

The barons of the Fourth Estate may have lost considerable power amongst those who get their news and opinions from TikTok et al, but they still (for now) wield considerable influence amongst both the population at large (directly through printed & online newspapers) and amongst the 'establishment' (particularly politicians).
And it is that tiny section of society that has been trying to foment FUD amongst the legislators - which if you look at the ruling 'families of the press' may come as no surprise.

Conversely I think you're wrong to assume that AR's 'little problem' is insignificant ... quite possibly in tax terms, but far less likely in political terms.
The vast majority of the voting population is neither rabidly right or left wing, cleaving instead to an ill-defined sense of the British 'fair play' ethic. And to them a bill avoided of as little as £3,500 is not insignificant - it's an amount that makes them wince. If anything the comments I've heard are more along the lines of 'how come we have to pay tax when we sell mum's house but she got away with it?'
More importantly, despite all the evidence to the contrary (from members of every political hue), no-one likes a hypocrite ... which is the uncomfortable clothing that AR appears to have donned.

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By adam.arca
19th Apr 2024 13:12

I'm not sure I agree with either of Philip's propositions. In fact, no, I am sure that I disagree. Strongly.

The issue with AR isn't the quantum of tax, however insignificant (I hadn't realised an amount had been calculated, must have missed that). Rather, the issue is that politicians these days should be squeaky clean, especially those who make a point of expecting their fellow politicians to be squeaky clean. AR has lived by the sword and must now die by the sword.

As for non doms, yes it is a difficult relief to justify but we've got to live in the real world. Are we not potentially cutting off our nose here? Do we want a big slice of no pie at all or should we be happy with a small slice of a big pie? Just think of all that VAT on their spend, of the employment (directly and indirectly) they create, of the businesses they probably invest in. I'm not averse to taxing non doms a bit more but I don't want to put them off completely: let's pluck a few more feathers by all means but not so many that they hiss and consequently p.*.s.s. off.

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